A tale of two trusts: More academy chains £1m+ in the red, but others improve

The number of trusts over £1 million in the red has almost doubled in a year as leaders warn it is “tougher than ever” to keep pace with increased costs.

Overall, eighty-three trusts running 293 academies had deficits by the end of 2024-25, Schools Week analysis has found, narrowly down on 12 months before.

But seven are now saddled with seven-figure holes in their budgets, up from four a year earlier. The highest is £9.2 million.

Dozens of others have pulled themselves out of financial peril, however, with one now more than £300,000 in the black, after being £2.6 million in deficit in 2020.

Pepe Di’Iasio, the general secretary of the ASCL leaders’ union, said: “The mixed picture on deficits reflects the mixed financial situations of schools and trusts.”

Finances remained “extremely challenging”, with leaders “having to make some very tough decisions”.

 

Seven trusts over £1m in red

Of the seven trusts now more than £1 million in deficit, the largest deficit was posted by the St Ralph Sherwin Catholic MAT (£9.2 million).

Kevin Gritton, its chief executive, previously said he has worked with the Department for Education on a financial recovery plan, with changes planned to “staffing structures at some schools and our central team”. Consultation is underway.

It was followed by the Arthur Terry Learning Partnership (£8.4 million) and Brooke Weston Trust (£3.4 million).

Earlier this year staff across 20 Arthur Terry schools walked out over planned redundancies. The trust later “agreed to end all current consultations linked to staffing restructures”.

But correspondence shared with parents last month said it would seek voluntary redundancies to “reduce the risk” of compulsory exits.

A spokesperson said this week the DfE “has agreed to provide a non-recoverable fund to cover the costs associated with restructuring”.

They stressed the trust recognised “the scale of the challenge” with “significant progress” made since Lee Miller’s appointment as interim chief executive earlier this year.

Arthur Terry is also consulting on the next phase of its controversial use of iPads, having bought 5,500 devices and leased 5,500 more, which created “an ongoing annual commitment of over £1 million”.

Brooke Weston accounts show a voluntary redundancy and staff redeployment exercise led to almost £1.3 million in “exceptional” costs. In all, the trust agreed 50 redundancy applications.

Andrew Campbell, its chief executive, said its “prompt action on cost” had secured “long-term viability for our schools and, importantly, means that our new chief executive will inherit a strong and sustainable outlook when they start in the new school year.

“We are ahead of schedule to return to a positive reserves position and then to achieve our target of 3 to 5 per cent as per our reserves policy.”

Standalone struggles

Of the 83 that were in deficit last year, 56 (67 per cent) were single-academy trusts (SATs). Only 10 ran more than nine schools.

Salvatorian SAT again had the largest deficit (£1.2 million), despite improving its position slightly. Accounts show it received a £1.2 million government loan.

The trust has a “reasonable expectation” that the support will continue, given its “strong academic performance and underlying improving financial position”.

Stephen Morales, of the Institute of School Business Leadership, said the data suggested it was becoming increasingly difficult for single schools to manage rising demands and cost pressures

This comes after Labour unveiled its white paper vision in February for all schools to join or form trusts.

Pointing to the number of SATs in deficit, the document posed a “challenge to our best standalone schools” to partner with others and make the system less fragmented.

‘Unsettled’

Forty-eight of the trusts in deficit by the end of 2024-25 were in the red the year before. Finances worsened in half of them.

The Cotswold Beacon trust had a deficit of almost £1.2 million.

Accounts said this reflected the impact of several finance leases for IT equipment that were entered into “without available budget towards the end of the previous financial year”.

Trust chiefs have received additional cash from ministers “with an expectation that further support may be required”.

It has also signed a partnership agreement with Lift Schools, one of the country’s biggest MATs, with a view to a merger.

Leora Cruddas of the Confederation of School Trusts said leaders were contending with funding that was not keeping pace with rising costs and responsibilities and “an unsettled economic picture”.

“This can mean really difficult decisions, and sometimes structural changes that can take some time to fully come into effect.

“While it is good to see overall an improving picture of financial health generally, we expect the next few years will be very tight financially.”

‘Tougher than ever’

Speaking recently, the DfE said most trusts were operating with a cumulative surplus or breaking even.

The introduction of trust inspections would raise standards by “providing a clear assessment of strengths and weaknesses, identifying the strongest trusts best placed to grow, and helping identify where improvement is needed”.

A previous School Week investigation identified 48 local authority schools with deficits of more than £1 million, with one £5.6 million in the red and expected to rack £1.4 million more in losses by 2027.

Diocese of Norwich Education and Academies Trust (DNEAT) CEO Oliver Burwood believes it is “tougher than it’s ever been in terms of your need to make changes to keep up with increased costs”.

If you don’t do this, you can “quite quickly tip over from a positive position into a negative one”.

On Wednesday, seven unions – including the NASUWT, National Education Union, Unite and Unison – published a joint statement criticising the government’s plan for all schools to join a trust.

Among other things, they cited “serious concerns” over financial oversight in the chains and “significant public expenditure” needed to academise as they told ministers the move “risks deepening fragmentation” rather than creating a “stable and collaborative education system”.

In response, a DfE spokesperson said: “The evidence is clear: the best trusts have a strong record of improving schools. That is why we want every school to access those benefits.

“But collaboration only works if accountability keeps pace. New trust standards and independent trust inspection through the children’s wellbeing and schools act will set clear expectations — and where standards are not met, we will act.”

£1 million surpluses

Government data suggests 83 trusts – 3.9 per cent of all academy chains – posted an overall deficit last year. The figure is down slightly on the 90 (4 per cent) recorded in 2023-24.

Our analysis suggests 30 moved into the black last year, with two now sitting on reserves of more than £1 million.

The Dartmoor Multi Academy Trust moved from a £41,000 deficit to a £1.5 million surplus by the end of last August.

A spokesperson for the 19-school chain said Rachel Shaw, its chief executive, “took a deliberate and disciplined approach” to strengthening finances after she was appointed in November 2024.

In the east of England, DNEAT also moved into a seven-figure surplus, having been almost £180,000 in deficit.

Burwood acknowledged the trust had been “over-optimistic in terms of income” predictions in previous years before shifting to a “cautious” approach.

More ‘maturity’

A report from the Kreston group, a network of accountancy firms, found only 37 per cent of trusts returned in-year losses in 2024-25, down from 60 per cent 12 months earlier. The largest MATs recorded gains of £1.1 million on average.

The accountants attributed this to the sector being given a “pleasant surprise” by the government, which covered “a little more of the [teacher] pay rise … than expected”.

“In a sector where the finances are so finely balanced then this can make all the difference.”

James Rant, the chief financial officer of the Red Kite Learning Trust, said that by the time the teacher pay grant was awarded, his organisation had “gone through processes of consultation and redundancy that could have been avoided if we had that information earlier”.

Morales believes the “slight improvement in reserves could be evidence of some resource management maturity”.

£300,000 surplus

In the south east, the Parallel Learning Trust recorded a deficit of £2.6 million in 2020. By the end of the last financial year, the five-school chain had more than £300,000 in savings.

A spokesperson said the turnaround “is directly connected” to the support it received from the Thinking Schools Academy Trust over the past six years.

“All contracts and our procurement process were immediately reviewed to ensure best value for money, we have rationalised central team roles, and we have established a system whereby heads are encouraged to act in a financially viable way.

“No appointments can be made unless a business case is made for them and approved, and heads show proactive leadership in terms of their budgets.”

Meanwhile, Palladian Academy Trust held a small surplus of just under £100,000 by the end of 2024-25. Twelve months earlier it was almost £850,000 in deficit.

Julia Finch, its chief financial and operations officer, said it “faced significant financial challenge as a result of several pressures converging at the same time”.

These included “unprecedented” inflationary pressures, rising agency staff fees and “escalating alternative provision (AP) costs”.

It conducted “comprehensive staffing model reviews across all schools”, introduced more centralisation “to strengthen specialist capacity” and cut reliance on external AP.

The last of these goals was supported by the trust’s only secondary in-house inclusion hub, which, Finch said, was “now fully embedded and effectively meeting pupil need”.

Rant also pointed to leaders “managing cash better”, with many making greater use of “high” interest rates. The government’s figures suggest trusts generated a record £167 million in investment income last year, up on the £136 million recorded in 2023-24.

… but don’t pop the Champagne

However, the Kreston report said “a great deal of uncertainty” remained. All trusts, except medium-sized MATs, were forecasting reserves to fall by up to 43 per cent over the next two years.

Kevin Connor, a report author and head of academies at Bishop Fleming, said this showed continuing uncertainty was “already weighing on confidence and limiting trusts’ ability to plan, invest and grow”.

“On the face of it, academy trusts have had their strongest financial year since 2022.

“However, surpluses have been largely propped up by tighter budgeting and in-year funding that trusts were not expecting when they set their budgets, rather than by any easing of underlying financial pressures.”

Rant added much of the “cautiousness” stemmed from “uncertainty over pay awards and the funding to follow”. He was on a call with other CFOs this week where they “were all still debating what the pay award would be for September”.

Kreston added that in-year gains for the smallest trusts were “still very modest”, before “we pop the Champagne corks”.